Daily Morning Note – 9 Sep 2020

PHILLIP SUMMARY

Wall Street stocks finished sharply lower Tuesday, with large tech shares suffering another drubbing in a broadening sell-off that also hit energy and financial companies.

The Dow Jones Industrial Average dropped 2.3 per cent, or around 630 points, to close at 27,500.89.

The broad-based S&P 500 shed 2.8 per cent to 3,331.84, while the tech-rich Nasdaq Composite Index slumped 4.1 per cent to 10,847.69. The Nasdaq has declined 10 per cent in the last three sessions after hitting the last in a series of records on September 2.

BREAKING NEWS

Temasek Holdings on Tuesday reported that its one-year total shareholder return (TSR) had fallen into negative territory to -2.28 per cent for the 12 months ended March 31, 2020, in part due to the sharp market correction in the quarter up to March 31 in response to the onset of Covid-19. This is a further drop from the previous fiscal year’s one-year TSR, which had tumbled to 1.49 per cent. TSR is a compounded and annualised measure that includes dividends paid to its shareholder but excludes its shareholder’s capital injections. Compounded over 46 years since its inception in 1974, annualised returns stood at 14 per cent.

Glove manufacturer UG Healthcare Corporation has started work on a new manufacturing facility in Malaysia that will boost its production capacity by 1.2 billion pieces of gloves per annum. In filings to the Singapore Exchange on Tuesday, the group said it acquired the land for the facility through its acquisition of UG Engineering, a company incorporated for the purpose of buying the property. UG Engineering bought the property in January for RM5 million (S$1.65 million) and remained dormant until UG Healthcare purchased both the subsidiary and property.

Keppel REIT’s trustee has priced S$150 million of fixed-rate subordinated perpetual securities at 3.15 per cent, the real estate investment trust (Reit) manager announced late on Monday night. The new perps are expected to be issued at par on Sept 11, and listed on the Singapore bourse on or around Sept 14, the Reit manager said. Net proceeds from this issue after deducting expenses will be used to refinance the trustee’s existing S$150 million, 4.98 per cent subordinated perps.

CapitaLand Mall Trust (CMT) has secured its first sustainability-linked loan of S$200 million from UOB, the CMT management announced on Tuesday. Under the loan, which was converted from a revolving credit facility, UOB will offer CMT tiered interest rates based on the trust’s achievements in the annual GRESB Real Estate assessment. GRESB is an environmental, social and governance (ESG) benchmark for real estate and infrastructure companies’ ESG efforts in management, environmental performance and building development.

Fund manager Quarz Capital Asia is now deemed a substantial shareholder of Sunningdale Tech, with the purchase of 4,600 shares via a market transaction on Monday having bumped its shareholding to 5.001 per cent. The bourse filing reporting the change in interest on Tuesday noted that Quarz Capital’s interest in the precision manufacturer entirely comprises deemed interests, and it is deemed interested in the shares in its capacity as investment advisor and fund manager of various funds and accounts.

First Ship Lease (FSL) Trust has “amicably resolved” its claims against Torm Singapore for Torm’s breaches of redelivery obligations as a bareboat charterer, FSL said in a bourse filing on Tuesday. FSL had filed a claim against Torm in UK courts in January 2019 for US$1.89 million, after Torm redelivered two vessels to FSL’s subsidiaries “in an untradeable condition”. The FSL subsidiaries made the necessary repairs and filed the claim for costs and losses incurred, plus interest and legal costs.

Mainboard-listed real estate and agriculture firm Hong Lai Huat Group has inked a non-binding memorandum of understanding (MOU) with Denmark-based farm equipment supplier Skiold. Both parties intend to collaborate for a proposed Cambodia-Singapore Agriculture Special Economic Zone with an estimated investment value of US$1 billion, said Hong Lai Huat in a bourse filing on Monday evening.

Source: SGX Masnet, The Business Times, Bloomberg, Channel NewsAsia, Reuters, PSR

TECHNICAL PULSE

Medtecs International Corp Ltd

Analyst: Chua Wei Ren

Recommended Action: Technical SELL

Medtecs International (SGX: 546) strong rally has come to a halt after prices failed to advance past $2.00 on 19th August 2020 and the downside correction follows afterwards. Technicals indicate that the stock will continue its downside correction despite the Ichnimoku cloud still on an uptrend.

>> Read more technical reports

RESEARCH REPORTS

Sembcorp Industries – Charting a new course

Recommendation: BUY (Initiation), Last Done: S$1.92

Target Price: S$2.72, Analyst: Terence Chua

– Sembcorp Industries shareholders could receive a total of $2.72 per share.

– IPO of Sembcorp Energy India Limited to crystalise value of SCI’s India business unit, which we estimate to have a value of about INR98bn or S$1.8bn.

– Potential positive re-rating of SCI following the demerger as profitability and return on equity improves in FY21e.

– Initiate coverage with BUY recommendation and target price of $2.72. We benchmark our valuation to 0.7x P/BV FY21e. SCI shareholders will also receive 4.911 of SCM shares for every 1 share held. Based on SCM’s last closing price of $0.199 on the 7 September, SCI shareholders could realise a total of $2.72 ($1.75 + (4.911 x $0.199)).


>> Read more research reports

HK Reports – Read up on our Hong Kong reports here

RESEARCH VIDEOS

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Market Outlook: (PSR) MMH, FCT, Proposed Merger of CMT and CCT, SG Banks, Technicals, SG Weekly and more

Date: 7 September 2020

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Phillip Research in 3 minutes: #25 – Prime US REIT; Initiation

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